Dean Baker on the Budget Deal

The ability of Washington to turn everything on its head has no limits. We are in the midst of the worst economic downturn since the Great Depression. Even though the recession officially ended two years ago, there are still more than 25 million people who are unemployed, can only find part-time work or who have given up looking for work altogether. This is an outrage and a tragedy. These people’s lives are being ruined due to the mismanagement of the economy.

And we know the cause of this mismanagement. The folks who get paid to manage and regulate the economy were unable to see an $8 trillion housing bubble. They weren’t bothered by the doubling of house prices in many areas, nor the dodgy mortgages that were sold to finance these purchases. Somehow, people like former Federal Reserve Board Chairman Alan Greenspan and his sidekick and successor Ben Bernanke thought everything was fine as the Wall Street financers made billions selling junk mortgage and derivative instruments around the world.

When the bubble burst, one of the consequences was an increased budget deficit. This is kind of like two plus two equals four. The collapsing bubble tanked the economy. Tax revenue plummets and we spend more on programs like unemployment insurance and foods stamps. We did also have some tax cuts and stimulus spending to boost the economy. The result is a larger budget deficit.

All of this is about as clear as it can possibly be. The large deficit came about because the housing bubble, which was fueled by Wall Street excesses, crashed the economy. Yet, we are constantly being told by politicians from President Obama to Tea Party Republicans that we have a problem of out-of-control spending.

The claim of out-of-control spending is simply not true. It is an invention, a fabrication, a falsehood with no basis in reality that politicians are pushing to advance their agenda. And that agenda is not pretty.

According to numerous reports in the media, President Obama wants a “big deal” on the budget, which will involve cuts to Medicaid, Medicare and Social Security. The last is especially ironic, since Social Security is financed by its own designated tax. Therefore, it does not contribute to the deficit.

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10 thoughts on “Dean Baker on the Budget Deal”

If in the future, there is ever a fair and just society I think their history books will report with amazement the con-job that has been foisted on ‘Western democracies’.
People believe themselves free because they have the choice between tweedle dum and tweedle dee. Sometimes just tweedle dumb and tweedle dumber.
Obama, Bush, whoever, are just the person in the shop window. ‘Democracy’ keeps the masses sated while the rich and powerful consolidate their wealth and power.
I firmly believe, that in the West, we need to shake off the shackles and reclaim our citizenship.

There is evidence all around demonstrating the fact that our government is no longer for the people but is instead for the wealthy conmen/women. However, one of the most startling indicators for me is still the fact that when tax dollars were used to bail out the white collar thieves, we ended up funding their golden and platinum parachutes — and there was no recourse, no accountability. Washington simply shrugged its shoulders and said, “Oops. Sorry about that. Not.” Unf***ingbelievable.

Indeed. Unf***ingbelievable. One of the reasons I don’t write more about politics than I do is because it depresses me how often (1) the people in power behave like village idiots, and (2) the people in power are corrupt.

What seems the oddest about The One is that people actually believed him. What seems even more odd is that after all the broken promises, there are still people that are members of his cult of personality. To steal from CD above, Unf***ingbelievable.

In today’s world, there is no reason to have governments. I have been saying it for years and I will keep on saying it until it happens or I die.

None of this is surprising, given that we live in an oligarchy that is more or less controlled by corporate interests. Ordinary citizens are seen as a source of revenue and votes, little more. When will ordinary citizens start speaking up?

I’d say you just about have it right. Obama may not actually believe that, but his actions show that this is what he’s willing to do.

Frankly, I’m more amazed by the day that this issue still exists. The debt ceiling is one of those little technical hurdles that a functional government knows how to deal with. The Fourteenth Amendment clearly states that the government can’t ignore its obligations. Congress has passed laws mandating that things will be done by the government. If Congress didn’t legislate enough revenue to accomplish that, then Congress needs to fix it. In a law-abiding government, the President doesn’t have a choice but to borrow money to pay for essential and mandatory services, which nearly all of the budget is.

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